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First Republic Bank Posts Statement

While we would expect to see banks put out a rosy statement at least First Republic (FRC) put one out. Looking around many have had no response to the situation.

With the whipping the FRC preferreds took today certainly soothing words are required–but then again folks need to determine for themselves how accurate the statements might be.

The statement is here.

43 thoughts on “First Republic Bank Posts Statement”

  1. Andrew Biden, a seasoned Financial Analyst with deep insights into the U.S. banking sector, has launched “ US Bank Branchs ” a comprehensive website providing expert analysis on American banks. With years of experience in financial analysis, Andrew offers a unique perspective on the operations, financial health, and future outlook of banks, from national giants to regional players. This platform is a valuable resource for anyone seeking in-depth, reliable information on the U.S. banking industry.

  2. So are we to think that FRC’s preferreds should be ok now?

    March 12 (Reuters) – U.S. private bank First Republic Bank said on Sunday it had secured additional financing through JPMorgan Chase & Co, giving it access to a total of $70 billion in funds through various sources.

    First Republic’s announcement came after its share price was hit last week in the aftermath of a run on SVB Financial Group .

    Silicon Valley Bank’s collapse on Friday prompted U.S. Federal Reserve and other regulators to announce a series of emergency measures to shore up confidence in the banking system.

    In a statement, First Republic said additional borrowing capacity from the U.S. Federal Reserve as well as that from JPMorgan had boosted the amount of liquidity it had available.

    1. And now all depositors are supposedly 100% covered. THIS SHOULD HAVE BEEN ANNOUNCED FRIDAY.

      This is a failure by Janet yellin. Fresh on job, she fails first test. Too busy with DEI and gobal warming being racist

  3. I contend it was a failure of the regulators. OCC and or FDIC.

    No bank in the country could withstand a full run on the bank. Including ALL of the TBTF banks. WHAT did they learn after LEH, anything??

  4. Man……………..So when did word of SVB hit the news wires. I did not see a peep Thursday. Unsure of when it broke. BUT the word was out Friday. FRC closed at like 98? Under heavy pressure thursday. Friday not sure where it opened but by 940ish it hit 45 in heavy, short trading windows. Then it popped to 85 in 15 minutes. Closed where 75?

    I did not see word of SVB until after 10 am. But SVB insiders must have known. The housekeeping crew must of learned about it late Thursday. Phew headline today …95% of depositors were uninsured.. It makes no sense to me that are liquidating SVB bank. A shot gun wedding with WFC ok but complete failure? Anybody not in the 12 TBTF banks is going to race for the exits. The fed had opened pandora’s box. I understand from bank lawyer for one of the big Canadian banks w US branches…they are extremely concerned with credit card clearings. WTF were the regulators thinking? Asking Yellen is like asking Christie Rhomer…nothing there

    1. I saw that the CEO of SVB managed to pull out $2 million ahead of the rush. Is that insider ‘banking’ ?

      1. No that’s called exercising and selling stock options. Anybody who has ever been awarded out of the money options knows. Nobody exercises eat a loss and holds on. When they are in the money, you take em and SELL. It’s very, VERY common.

        He sold 11% of his holdings, he kept 89% and lost every dime he left behind! But that doesn’t win sound bytes does it?

    2. “In 2018, a bill was signed that lessened regulatory scrutiny for many regional banks. Silicon Valley Bank’s chief executive, Greg Becker, was a strong supporter of the change, which removed the requirement that banks with assets under $250 billion submit to stress testing by the Fed, and changed requirements for the amount of cash they had to keep on their balance sheets to protect against shocks.”

      The 16th largest in the country got less scrutiny and has now failed. I for one, do not consider the 16th largest bank in the country to be too small to get the highest level of scrutiny.

      We are back to under regulating all but the largest money center banks.

    3. IYP – Minor correction – it isn’t that “95% of depositors were uninsured”, it is that “95% of DEPOSITS were uninsured”. Every depositor is insured, but only up to the FDIC limit. Depositors with deposits in excess of that limit may be in trouble, but they likely won’t lose all their uninsured deposits – but they may lose some and it may take time for them to be paid out.

      I think regulators were trying to do the right thing – stop the run on the bank before everything completely cratered. They didn’t act fast enough, largely because I think the scale and rapidity of the failure caught them (and everybody else who didn’t have inside information) off guard.

      I would be willing to bet that FDIC tried to arrange a “shotgun wedding”, just like they were trying to do for Silvergate, but things just moved too fast. FDIC can’t force a wedding, but they can “lean” on potential buyers pretty hard – but probably not in a single day (not sure anyone even had enough of a handle on the day-current financials to even have a rational conversation). That said, FDIC (and others) are likely still scrambling to arrange a transaction to have someone take over SVB – but somebody (investors, maybe uninsured depositors) will have to take a big haircut.

      I was involved in a bunch of transactions back in the savings and loan crisis in the late 80s. Most of the failing institutions were eventually taken over with “$help$” from the RTC. Straight FDIC takeovers are usually much simpler, but they take time to wind up.

      The good news for small depositors is that the bank will reopen on Monday with full access to their funds.

      FWIW, as I recall, federal rules would have allowed SVB to close its doors on Thursday when the run started, but management didn’t do it (probably hoping to be able to recover- closing the doors is suicide). Banks can’t be closed for more than one business day, but it might have allowed for a more orderly situation.

  5. In the back of my mind, I remember the pension fund crisis in Britain last Oct. and the mass selling of securities to cover redemptions.
    So many moving parts and the possibilities of where things could go wrong. Here we have a good old fashioned run on the bank with major depositors pulling large sums of money out all at once. You have mutual funds, ETF’s holding the stocks and bonds of the banks. The possibilities are endless.
    But what have we learned about stopping a lemming like panic?
    Putting a stop mechanism in place. A complete stop could panic people even more, but a partial stop can act as a panic also.
    Other examples, the recent REIT panic. funds setting a withdrawal limit. The SEC rule from 2010 that allows MM funds to stop withdrawals for a limited time, set penalties for withdrawal, even pay out less than a dollar per share.
    Maybe some mechanisms like this could be put in place for large deposits at banks.
    Please don’t take this as being Socialist. Look at it from the view that a majority of the wealth in this country is concentrated in corporations and individuals and what happens effects everyone. Even the common person has money in Goldman Sachs, Wells Fargo, BOA, retirement and life insurance in Prudential, Allstate, Liberty Mutual etc.

    1. Charles,
      There are some “stops” in place for the banks.

      -The bank can just stop (close its doors) for a day and stop the outflows. It isn’t perfect, but it is available. Unfortunately, bank management has to pull that trigger, and I suspect few bank presidents want to do so because it would essentially be seen as the death knell for the bank.

      – Bank regulators or the FDIC can step in and close the bank. Unfortunately, when things move as fast as they did for SVB, I just don’t think the regulators realized how bad things had gotten so quickly, so it took them a day to act.

      Some of the protections in the financial world are “automated”, like the “circuit breakers” in the stock market. I am not sure how we could automate something like that in the banking sector. I suspect there will need to be people involved making judgement calls based on (rapidly) evolving situations. If that is true, it will always take time for them to act.

      Maybe someone smarter than me can figure something out. Biggest challenge is to make sure the cure isn’t worse than the poison.

  6. Etrade has just restricted all Fixed Income , i.e. Brokered CD’s, Treasuries
    to call in orders, i.e. no more online trading of these issues. Are they
    going to charge now?

    1. I believe E*trade is changing over to MS this weekend and shut down the online platform until Monday morning. You may want to check on that

      1. Yes, that is the thing. I don’t think they’re restricting trading. It’s a system turnover to the MS system. Not sure how it will differ either. We should see on Monday.

  7. Another way of looking at FRC. 80% of total deposits are above FDIC limits, which could leave it prone to a Peter Thiell style run on the bank if big customers suddenly decide to pull out. “Deposits Less Than 250K as a percentage of Total Deposits.” SVB was near bottom at 97%, while SIVB was midpack, at a respectable 60%. Go figure.

    The S&P Global Markets Intelligence 100 bank list can be found on Wall Street Bets on reddit. I have no idea if this link works. https://i.redd.it/gjolf3latzma1.jpg

    If you look at the list, you might conclude a major increase in FDIC insurance is needed or some form of excess liability insurance to prevent bank runs. The whole system looks shaky. (If you were a CFO , would you leave your payroll in a bank with rumors?) Businesses do need to operate.

    1. I wonder what the SIPC rules are compared to FDIC? I think it’s 500K. But is that total assets held or per account??

    2. Money in checking accounts at FRC can be transferred online this weekend while the bank is “closed.” The increase in CD rates versus 12-18 months ago provide a strong incentive to redeem CD’s early at FRC and receive more income and better security in Treasury’s or higher paying CD’s at the TBTF institutions.
      Wonder if any school districts, municipal agencies, or not for profit groups have uninsured funds tied up at SVB/FRC or other similar regional banks?
      What am I missing?

    3. Bear,
      FDIC insurance was put in place to protect the “little guys” who were regularly getting slammed by bank failures. In “the old days”, the thinking was that the big guys always go taken care of first, and little guys got nothing. Oh how times have changed (or not).

      I doubt any banker would want to pay 10x the current FDIC premiums (or 100x or 1000x – I haven’t done the math) to protect big deposits. I am not sure bank customers would want to pay for that either (indirectly in higher fees, or something).

      I am not sure we could come up with an insurance product that would prevent bank runs. but maybe insurance companies could create a private insurance product to sell to companies who are making deposits above FDIC limits. It would limit those companies’ losses, but probably wouldn’t stop runs. In any case, I wouldn’t want to be the guy to try to sell it. Maybe that will change with this bank failure, i.e. it may become one of the insurances “prudent” management buys, and that “prudent” boards require management to buy.

      1. @Private


        “Which sweep vehicle is best for you?

        3. A multibank deposit may offer relatively better-or-worse than average yields, yet it is designed to maximize FDIC insurance protection by linking a number of banks within the offering. Therefore, as soon as a deposit nears the $250,000 threshold, the excess balance is shifted to another bank to take advantage of that bank’s $250,000 FDIC limit, and so on. Most programs offer the opportunity for FDIC insurance up to $2.5 million.”


      2. “FDIC insurance was put in place to protect the “little guys” who were regularly getting slammed by bank failures”
        The “little guys” who got slammed were local depositors at a local bank, where local conditions can hit hard but are muted if the bank has assets and depositors across wide geographic areas.

  8. “Banking” industry blows up more than the drummer from Spinal Tap.

    Spent a few years in banking myself. It should be a very mundane business mostly slurping fees and interest and of course taking “the spread”.

    Let us remember mister WAMU is fine and no problems here, CEO Kerry Killinger. Here is what he said about five months before WAMU went banko city;

    “I just want people to calm down and have a little faith,” said Killinger


    Now go and watch the movie “It’s a wonderful life” and see that things really don’t change. If I remember correctly, FDIC, has about 2% of insured deposits to pay out in actual assets.

    If you really want FDIC, get rid of the F-D-C and keep the I. IMHO the only business that should be selling insurance is an insurance company not a bank. I do own some bank pfds, but stay away from the TBTF’s at all costs. The smaller the institution the easier to analyze (for me at least).

      1. @wayne

        The only reason people feel safe with a Bank is FDIC. I’ve sold millions in CD’s and that is what the customer buys in to EVERY time. If there was no FDIC, I doubt anyone would want to use a Bank for much on the deposit side.

        The movie I suggested watching is a clear example of when there is no FDIC.

        So yes FDIC is not a bank, but the industry uses it to sell product. In the insurance industry, you CANNOT use the State Guarantee fund to sell a product!

        1. > So yes FDIC is not a bank, but the industry uses it to sell product. In the insurance industry, you CANNOT use the State Guarantee fund to sell a product!

          That you have a federal guarantee is the *entire point*, though. Think back 90 years to 1933… people were scared to death of keeping money in banks after so many failures until FDR set up the FDIC. They want you to advertise the backing!

          1. @ O. Chongusu

            They (banks) want to advertise because you most likely won’t buy IMHO.

            The Federal guarantee is essentially the American taxpayer (when the fund runs dry). What other industry can you make such mistakes knowing you have only .0135 cents to every $1 of insured assets?

            One of the limitations of FDIC is that they have trouble keeping the reserve ratio at the statutory level. The survivors ending paying the premiums for the stinkers who go banko. So essentially if your bank survives and keeps out of trouble, your reward higher premiums going forward.

            “The Deposit Insurance Fund, or DIF, balance fell during the first quarter by $100 million to $123 billion, its first decline in over a decade. The DIF reserve ratio, which is the fund balance as a percent of insured deposits, fell 4 basis points from the previous quarter to 1.23%. The DIF reserve ratio is required by law to be at least 1.35%. At the onset of the COVID-19 pandemic in the first half of 2020, the reserve ratio dropped to 1.30% due to extraordinary insured deposit growth.”


            When the fund is used up, the Chair of the FDIC has to beg for more money. If you ran an insurance company like this, it wouldn’t last long.

            —Former FDIC Chief Sheila Bair: Banks ‘Need More Capital’—

            “Capital levels have improved since prior to the [financial] crisis, but loan-loss reserves are down significantly as banks keep releasing reserves to drive earnings. They’ll tell you ‘credit quality is getting better, the economy is on the upswing.’ I don’t know about that.”

            “Banks need more capital and should stop releasing reserves, said Bair, now a director at Banco Santander. ”


        2. FWIW – I don’t think private insurance of the banks would be workable. We used to have “banks” that didn’t have to have FDIC insurance but had other insurance (including insurance from the other federal insurance plan, FSLIC).

          Then we had the savings and loan crisis in the late 80s when lots of those “banks” started to fail and the federal government had to create the Resolution Trust Corporation to clean it all up and push all the “banks” into FDIC coverage. Probably not something we want to repeat.

          More importantly, FDIC is not just insurance – it has teeth. They can step in and close a bank – something a private insurer couldn’t really do (and wouldn’t want to).

    1. Appears some of todays bankers werent instructed on the basic tenants of banking 101. The ol 3-6-3 Rule. Gather deposits at 3%, lend out at 6%, and be on the golf course by 3 p.m.

    1. Price is sometimes just that price, and no reflection of whether they will pay or not. During 08-09 bank crisis most $25 preferreds sank into $5-$8 range and yet continued paying (though some needed TARP help granted).
      I remember seeing the chart of 6.75% AES-C which was a $50 par issue. Like PacWest, AES crashed in sympathy with Enron when it went under (same relative business) and AES-C went to under $5 from $50. And yet never once suspended the payment and ultimately about 15 years later was redeemed at par.

      1. Good morning Grid,

        As always I appreciate your insight. Any particular banking preferrds you would buy on a crash?

        I started a small position in FCNCO Friday at the close but so far that is it.

        Thank you

        1. Sorry, I am not much help, as I know as little about banking financials as apparently some bankers do, lol. We all can be victims of our biases, sometimes we just arent aware. In this situation I am very aware of my bias. When I started investing in preferreds about 12 years ago, I researched more extensively “the bad” of owning preferreds. And being that was just outside of the “crisis” everything negative was about the bank preferreds going belly up, or crashing, or needing TARP. The “non cumulative” isnt a bonus either, ha.
          So that being said, I have never been a big player in banks usually owning no more than 1 or 2 at a time.
          That being said, preferreds due to their relative illiquidity always tend to throw the baby out with the bath water. It isnt like all of them are going under, too. And if you noticed the bank stalwarts like WFC-L and BAC-L actually both closed up on the day. So it was the regional and investment banks that took the hits and is likely some were hit a bit too hard and could be candidates for bounce backs or better longer term good yield grabs.
          Im still thinking, but I will maybe tops buy 100-200 shares on a few that were torched for a flip opp. I did buy 200 of ZIONO under par yesterday and really shouldnt have. As it didnt fit any real major bounce back opportunity being its a high yielding floater now past call. I probably need rehab addiction to “high yielding live floaters” and get weened off them to start watchful waiting on torched fixed perpetuals. Or before I get all my money tied up into 5% CDs, ha!

    2. Leonard:

      I interpret that PacWest press release as them basically begging customers to not withdraw deposits. Notice how they stated their deposit base as of 3/9/23 and not 3/10/23? No surprise there.

      If their customers demand just $15B in deposits back in the next few days (out of the $33B they hold), they are toast and that $5.3B of “unpledged, liquid securities” (which we all know are Treasuries and MBS) will likely result in a $500M – $1B loss if/when they are sold. Is there any regional bank out there that can truly survive a massive bank run?

      The Fed, Treasury Department, and FDIC may have to come up with some type of “guarantee all deposits” strategy if this thing truly metastasizes and regional banks start dropping left and right.

      Remember when the Fed guaranteed all money market funds at the $1 NAV back in 2008 for a 2-year period? Perhaps something similar to that.

      Then the Fed can once again be lauded for putting out the massive fire, even though they were of course the arsonists to begin with.

      Remember Bernanke’s silly “The Courage To Act” book? Expect more of that garbage from Fed Heads in the years ahead.

      The song remains the same. Meet the new boss, same as the old boss.
      Wash, rinse, repeat.

  9. I kept saying I had too many bank and other finance related preferred and I wanted to diversify. Just my feeling. Today was a good day to see which ones held up and which ones people had no faith in. Look at Tim’s list of BB and bank preferred and noticed which ones dropped the least.

  10. Owner of a tiny bit of FRC-I here which is now double the size… I could not help myself. Along with a few other beaten down bank names that were on blue light special.

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